Stimulus Package

[sultan_emerr]

The United States Constitution = http://www.usconstitution.net/const.html

[bozodog]

So creating jobs is not difficult for government. What is difficult for government is creating jobs that produce wealth. Pyramids, holes in the ground and war do not produce wealth. They destroy wealth. They take valuable resources and convert them into something less valuable.

Instead of iPods, great art, cures for diseases and machines that replace back-breaking work, we get the equivalent of digging holes and filling them up.

Under President Obama's "stimulus" plan, jobs will be created to weatherize buildings, construct schools and wind turbines, and repair roads and bridges. But outside the market process, there is no way to know whether those are better uses of scarce capital than whatever would have been produced had it been left in the private economy.

Since government services are paid for through the compulsion of taxes, they have no market price. But without market prices, we have no way of knowing the importance that free people would place on those services versus other things they want.

So although we'll see the government putting people to work and even some new schools and bridges, we won't be able to calculate how much wealth we've lost because scarce resources were misallocated by the politicians.

Nevertheless, we can be sure we will have lost. If the government's projects were truly worthwhile, they would be undertaken by private efforts, and in their quest for profits, entrepreneurs would handle them more efficiently. Real Jobs Create Wealth

[Pete_C]

Well, I still feel like I have since 2001 that we have been in a recession and downward spiral since 2001 and we had eight years of hands off wait and see and trickle down economics and deregulation to see if it works. It did not; it left us where we are now.

Yes, I still have a neighbor who blames Bill Clinton saying that it really began when the dot com boom busted. While I do agree that that collapse was an initial factor I blame the deregulation under the Graham Leach Bliley act which led investors to pull their money out of the tech sector and put it into newly deregulated financial and real estate ventures. This caused the initial collapse and further lack of oversight and deregulation of these markets put us where we are now.

In reality the "stimulus / bailout" can be separated into two basic catagories.

One is loans which as long as the recipient does not go under will be repaid with interest. Since the government has more or less been doing this all along through the Federal Reserve System this is nothing new other than the addition of specific targets and terms. We have done it in the past (the Chrysler bailout when Lee Iacoca ran it for example) and it worked then. But the key here is that it needs to include regulation and restriction as well as oversight. It is a "stopgap" measure until new laws can be passed to reinstate regulation and oversight.

The second major component is spending (and I include the tax credits/rebates as spending). The tax credits/rebates, give individuals a hand in choosing how the money is spent. Spend it on medicine, spend it on your mortgage, spend it on clothing, spend it on your car; the basic thing is hopefully the majority of people will spend it rather than just putting it in the bank just in case things get worse before they get better. The other part is goverrnment spending. Part of it is a gift to states to cover lost revenue since their revenue from sales taxes etc have slipped with the economy. Money to cover education expenses, medicaid, and infrastructure projects they would have had to delay or cancel otherwise. While States manage their medicaid programs, road and bridge projects, schools etc; they often rely on the Federal government for a major portion of the funding. This just takes money which would have been approved peicemeal over the next two or three years and pours it into the system now so that projects can proceed without delay and even get ahead of schedule.

Are some of the projects pork? Wasteful spending which is aimed at a specific Senator or Representatives home district ? Of course; but they would have been slipped in elsewhere along the way in other bills which could not be delayed if they had not been put in here and in reality they are a negligeable part of the whole.

Is the package complete? No, by all means it is not. There will have to be many individual targeted spending packages over the next couple years. There will have to be administrative and judicial interpretation of many sections of the package.

Above all it highlights the need for a "line item veto" authority for The President; where he can cut the pork out by removing speicifc appropriations tacked onto another bill and force those who add these items in to get full support for their item and do it in an aboveboard means. Or they need to change how legisltation is written and ban this manipulation of bills to add on pet projects unrelated to the original bill.

[JDoors]

Nice overview of the "stimulus" package Pete.

Not sure I agree with your assessment that the slide started that long ago, there was growth comparible to or better than the rest of the world's throughout those years. I still think the failure to reign in FM&FM and their subsequent collapse was the tipping point.

Agreed that "loans" have a good enough record that trying them now is a fair thing to do.

Not sure that putting a few dollars in consumer's hands will have enough effect on the economy to even notice. Now, if you put the ENTIRE SUM of the package directly into business and consumer's pockets and let THEM decide what needs "stimulus," NOW we're talkin' recovery.

I didn't like spending that much money on government programs (schools, etc.) that ALREADY have sources of funding, but your explanation makes enough sense for me to just go, "tsk, tsk", and let it drop.

The line item veto, though it has potential merit from a philosophical point of view, has already been declared, and rightfully so IMO, unconstitutional.

*****

Edited February 19, 2009 by JDoors

[jcl]

Well, I still feel like I have since 2001 that we have been in a recession and downward spiral since 2001 and we had eight years of hands off wait and see and trickle down economics and deregulation to see if it works. It did not; it left us where we are now.

There was a quasi-recession in 2001 but the economy grew something like 15% between 2000 and the beginning of the current recession.

Spend it on medicine, spend it on your mortgage, spend it on clothing, spend it on your car; the basic thing is hopefully the majority of people will spend it rather than just putting it in the bank just in case things get worse before they get better.

It occurred to me last week that if we encouraged people to save instead of spend there might be less need to bail out the financial institutions. It seems like a few hundred billion in deposits and cautious investments could keep quite a few companies afloat.

Or they need to change how legisltation is written and ban this manipulation of bills to add on pet projects unrelated to the original bill.

Single-subject rule. Never understood why it isn't more popular.